The United States and Indonesia will discuss the advancement of a potential minerals partnership focused on promoting the trade of nickel, a key metal for electric vehicle (EV) batteries. This discussion will take place during Indonesian President Joko Widodo’s visit to the White House to meet with U.S. President Joe Biden. The Biden administration is concerned about environmental, social, and governance standards in Indonesia and is exploring the feasibility of a deal. Further consultations with U.S. lawmakers and labor groups are planned. However, negotiations on the partnership are still in the early stages, and there is much work to be done before any formal announcement can be made. The White House has not provided any comment on the matter.
Indonesia, which possesses the world’s largest nickel ore reserves, has requested discussions with the United States for a trade deal on critical minerals. This request aims to ensure that Indonesian exports of critical minerals, including nickel, can be covered under the U.S. Inflation Reduction Act. While most of Indonesia’s nickel is currently processed into crude metal, the government is eager to develop an EV supply chain that utilizes its vast nickel reserves for battery materials.
The discussions between the Biden administration and Indonesia focus on ensuring that any potential nickel supply is produced with minimal environmental impact. The administration, including U.S. Trade Representative Katherine Tai, is committed to addressing environmental concerns. Despite promising momentum, there is still significant work to be done to establish a partnership. Indonesia’s nickel mining industry has been associated with heavy deforestation and water pollution, which raises concerns about sustainability.
Under U.S. law, a certain amount of critical minerals in EV batteries must be produced or assembled in North America or a free trade partner for EVs sold in the United States to be eligible for tax credits. As Indonesia does not have a free trade agreement with the U.S., discussions are underway to determine how nickel extracted from Indonesia but processed in China can be excluded from receiving IRA credits. The global market value for the nickel industry is estimated to be $33.5 billion in 2022, although the market is currently oversupplied.
The United States faces challenges in the nickel industry, as its only nickel mine is set to close in a few years, and the country lacks a nickel smelter. To support EV manufacturing and achieve Biden’s goal of leading in this sector, the U.S. government has provided funding for a nickel processing plant in North Dakota. However, there has been opposition from Indigenous people regarding a proposed Minnesota nickel mine. Some U.S. miners argue that the Biden administration should prioritize approving domestic projects rather than seeking international supply.
In conclusion, the United States and Indonesia are engaging in discussions to establish a minerals partnership focused on nickel trade for EV batteries. The Biden administration is considering environmental concerns and seeking consultations with lawmakers and labor groups. While progress is being made, there is still much work to be done before formal negotiations can begin. Indonesia’s vast nickel reserves and the need for sustainable mining practices present both opportunities and challenges for the partnership.
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